Emerging economies 'should guard against hot money'

Zheng called on major currency-issuing countries, when formulating their macroeconomic policies, to give more consideration to the negative effects on other countries.

During the latest quarterly meeting of the People's Bank of China, policy makers warned of "uncertainties" in pricing trends, citing capital inflow as one of the major causes.

The central bank's data showed foreign exchange purchase, a key indicator of capital inflow volume, rocketed to its highest ever level of 683.7 billion yuan ($110 billion) in January, against 500 billion yuan recorded throughout 2012.

Experts said such an increase is closely linked to the appreciation of the yuan against US dollar, which has reached its highest level in nearly two decades over the past week.

Liu Dongliang, a markets analyst with China Merchants Securities, said the strong performance of the yuan was a result of improving export data and robust industrial activities, which had ruled out concerns that the economic rebound lacked momentum.

However, Zheng said a bigger concern was that if easing measures were no longer in place, global capital would be pulled from emerging economies, which could lead to asset bubbles bursting, sparking a new financial crisis, "as history has taught us".

Zhang Yuyan, a senior researcher with the Chinese Academy of Social Sciences, said, "QE is not just a potential threat, it may be a very real problem."

Zhang added, "The foreign exchange reserves held by countries like China may suffer value losses, while fluctuations of asset prices and exchange rates may cause a new round of financial protectionism, including more financial regulation."

But Zhao Qingming, an expert on international finance with China Construction Bank, said tougher regulation of cross-border capital flow was necessary for China.

Zhao said regulation could cover two main areas: to protect against illegal cross-border capital inflow, authorities should adopt stricter supervision penalties; while for regular capital inflow from trade and foreign direct investment, the central bank should take comprehensive monetary measures to adjust domestic liquidity, to lessen the impact.